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Dubai property market shows strong growth in 2023, residential sector achieves record year

Residential transaction activity grew by 29% y-o-y to an all-time high of 118,200 units

Dubai property market shows strong growth in 2023, residential sector achieves record year

The real estate market in Dubai has experienced consistent growth in the past year, thanks to factors like the rising expat community, recent changes in real estate investor qualifications for the Golden Visa, and Dubai’s expanding and varied economy. And according to a recently released report by Savills titled ‘Dubai Property Market’ report for 2023, we should be expecting a robust year across different sectors in Dubai’s real estate market.

Swapnil Pillai, Associate Director of Research at Savills Middle East, mentions, “The macroeconomic sentiments for the UAE remain favourable. The non-oil sectors have seen significant expansion over the past two years, remain healthy, and are well positioned to grow over the next twelve months, which will benefit the real estate sector. However, there may be a risk of oversupply for select assets across a few locations, which may limit any significant increase in average prices going forward.”

Residential market

The residential market had its best year on record. Transaction activity grew by 29% y-o-y to an all-time high of 118,200 units. This was the first time the total transaction volume surpassed the 100K mark. The residential market has witnessed an upward trend since 2021, when 55,500 units were transacted, growing by 69% y-o-y. And within two years, activity levels more than doubled, creating a new milestone for the market. Dubai is now among the few global cities that have sustained growth in demand, which started after the COVID-19-induced restrictions were lifted.

Under-construction properties dominated demand during the year as 55% of the units sold were off-plan. Throughout the year, and more so during the second half, there has been a shift towards investment-led demand while end-user activity has marginally subsided. A total of 65,000 off-plan units were sold in 2023 while 53,200 ready units were sold during the year.

Throughout 2023, market activity continued to shift towards sub-markets in the south-east of the emirate. More than 52% of the total units sold in 2023 were concentrated here. Transaction activity was prominent across locations such as Jumeirah Village Circle, Dubai Sports City, Arabian Ranches, and Dubai Hills Estate, among others.

Apartments continued to be the most transacted property type, accounting for 78% of the total transactions recorded in 2023. Meanwhile, the demand for villas and townhouses remained stable. Locations like Damac Lagoons, Damac Hills 2, and Arabian Ranches 3 were among the popular locations for villa transactions. Popularly transacted locations had new villa completions in the year, like Joy Townhouses in Arabian Ranches 3, Chorisia Villas in Al Barari, etc., which could be the primary driver for the ready transactions.

Office sales and rental market

The office real estate market witnessed a surge in demand in 2023. The sustained economic growth, expanding non-oil sector, ongoing push to improve the ease of doing business, and government initiatives to support job creation, such as the Future 100 Initiative, led to a buoyant office occupier demand.

Throughout the year, demand was concentrated across good quality green-certified assets; a gradual yet evident move towards more sustainable operations is driving this trend.

Limited supply of Grade-A assets, which are most in demand has caused vacancy levels to drop, resulting in a spike in rentals. Buildings in the DIFC micro-market and Grade-A developments around it were among the most sought-after developments, especially from companies in the financial services and advisory/ consultancy sector. This led to an average 22% y-o-y increase in rents across DIFC, however, there were a few developments within the micro-market that have seen yearly rental increases of more than 40%. Across the city, rental values on average have increased by 18% y-o-y for Grade-A space.

Paula Walshe, Director of Transactional Services at Savills Middle East, elaborates, “Unlike other global markets, where demand for office space remains low compared to the pre-pandemic average, in Dubai, the general theme for 2023 was one led by expansion and new market entrance. Mergers and acquisitions (M&A) activity across the country also led to consolidation-led demand for office space across the city.”

Co-working operators continued to expand their footprint in the city, owing to strong demand for well-managed spaces that offer flexibility and cost-effective options.